The Australian share market rose (+3.9%) in February, that was the third positive month in a row and the best monthly return since May last year. The 12 month return to the end of February was a very credible (+16.4%), providing a good buffer for what is likely to be a very poor March.
The (+3.9%) return flattered the Australian share market as investors sort out the safety of resources and banks. The 5 largest companies on the Australian share market (the 4 main banks plus BHP) returned an average of (+11.2%) during the month, and the top 20 companies averaged a return of (+7.9%). The remaining 280 companies in the index provided a negative return for February.
It’s no surprise that the Resources (+9.0%), and Financial sectors (+8.6%) were the place to be, while the IT (-9.1%) and Healthcare (-13.4%) sectors stood out as the worst.
The world share index only managed a (+0.9%) return after significant falls from technology companies in the US. The US share market was down (-0.8%) for the month which was its worst return since March last year. There were some strong returns from European and Emerging markets, with most global markets rising – the UK (+6.7%), France (+5.6%), Germany (+3.0%), China (+1.1%) and Japan (+10.4%).
The US share market is having a comparatively bad run at the moment. Share market returns for the first 2 months of the year trail the rest of the world by (-9.0%). Last year the rest of the world outperformed the US share market by (+12.0%) which was the most since 1993.
Open AI (the company behind Chat GPT) raised US$110 billion valuing the company at US$730 billion. At the same time, spending on data centres for digital workers (approximately US$4billion per month) is now more than that being spent on office blocks to house actual workers.
National house prices climbed (+0.8%) although both Melbourne and Sydney were flat while Brisbane (+1.6%), Adelaide (+1.3%) and Perth (+2.3%) again led the way. Melbourne and Sydney are the only 2 capitals with negative growth over the past 3 months and have the lowest growth of all the capitals over the previous 12 months.
The unemployment rate increased to 4.3% and the inflation rate was 3.7%. The Reserve Bank increased interest rates to 3.85% with traders pricing in a 57% chance of a further rate rise in June, although the war in the Middle East probably makes the prediction meaningless. The Australian dollar continued to rise against all major currencies, (+2.2%) against the US dollar and (+2.5%) against the Euro.
The price of Oil ended the month up (+2.8%), Iron Ore fell (-4.3%), Gold rose (+7.9%) and Silver (+10.1%). Bitcoin has now fallen for a 5th straight month, down (-16.7%) for February, (-26.5%) for the year so far and (-42.8%) for the past 12 months.
Oil Crisis
One of the surest things in financial markets is the higher Oil prices go, the lower share markets will go. In Australian dollar terms the Oil price has risen (+52%) from the low point in January, but we have seen this a few times before. Since 1973 there have been 7 periods where the Oil price has jumped by more than (+40%).
The good news is the US share market has averaged a (+24%) return in the 12 months following an Oil shock. Every Oil shock over the past 40 years that didn’t lead to a prolonged recession was followed by a strong share market rally.
The last 3 major global events to hurt Australian investors were Trump’s Liberation Day Tariff announcement in April 2025, Russia’s invasion of Ukraine in February 2022 and Covid in early 2020. With the benefit of hindsight, all presented excellent buying opportunities.
Share markets have held up ok in the face of rising Oil prices so far. Taking a glass half full approach, for those with surplus cash and some lucky timing, this crisis (like all the other others before it) will most likely provide a good opportunity to benefit from a recovery.
